Federal Reserve to Protect Auto Loans

While the domestic auto makers were getting browbeat by Congress, NADA officials were meeting quietly with the Treasury Dept. to craft a plan that would help spur car sales by providing banks and lending institutions confidence to begin lending again.

The resulting plan was announced last week. The Federal Reserve will establish a $200 billion Term Asset-Backed Securities Loan Facility (TALF) which should facilitate the issuance and sale of securitized auto loans. The Treasury Dept. will provide $20 billion of credit protection using funds from the Troubled Asset Relief Program (TARP) to the Federal Reserve in support of the TALF.

"This is great news for consumers and auto dealers alike," says NADA Chairman Annette Sykora. "These steps will go a long way in helping to restore the consumer confidence that we need to return our country to economic stability. Dealers will be making sure that their customers are fully aware of the new opportunities they have when it comes to auto financing."

Another key point of TALF: the Federal Reserve maintained the ability to clarify its reach later on, which NADA hopes will lead to the agency using the funds to establish liquidity for floor plan financing for dealers.

"We call upon the regulators to confirm that the TALF eligibility requirements reach floorplan securitizations," Sykora says. "This would help ensure that dealers have at their dealerships the selection of vehicles that consumers want to buy when they come in to use the auto loans that the government has today freed up."